The panacea of heatwaves: Can climate finance mitigate heatwave welfare costs?

Abstract

This paper investigates the impact of climate finance on heatwave welfare costs using a panel dataset covering 137 countries for the period 2005–2019. We also delve into gender heterogeneity in the nexus between climate finance and heatwave welfare costs, as well as the moderating and mediation effects. We first find that climate finance significantly contributes to reducing heatwave welfare costs, indicating it is a vital means of mitigating the adverse effects of heatwaves. Specifically, a one standard deviation increase in climate finance results in a 0.08 standard deviation decrease in these costs. Second, a gender heterogeneity analysis reveals that climate finance has a more pronounced effect in reducing welfare costs for males compared to females. Third, urbanization and effective governance further amplify the impact of climate finance on lowering heatwave welfare costs. Fourth, the development of industrial robots is identified as an important mechanism, suggesting that climate finance promotes industrial robot development, which further alleviates heatwave welfare costs.